Lenders' Failure To Comply With City's Foreclosure Mediation Ordinance Could Result In Broken Chain Of Title, Ownership Problem For Subsequent Buyers

In Providence, Rhode Island, The Providence Journal reports on a potential problem with the city's recently passed foreclosure mediation ordinance:

• As it is written, the “foreclosure mediation ordinance” requires a meeting between lenders and homeowners prior to foreclosure. The goal of the meetings (moderated by an independent third party) is to modify a mortgage so that a homeowner can remain in his or her home.

• Any lender failing to comply with the requirements would not be able to have a deed of ownership recorded by the city Recorder of Deeds, a step necessary to complete the foreclosure process. Mayor David N. Cicilline, whose administration developed the ordinance, says changes are being requested to address problems noted since the roll out of the new mandates in September.

• One potential problem is the breaking of the chain of title if a bank or lender fails to comply with the ordinance. “Should the Recorder refuse to record the foreclosure deed, it would create a gap in the chain of title, which will affect the value of the property and create a problem for the purchaser,” according to a memo from the acting Recorder of Deeds, John A. Murphy.

For the story, see City seeks to add fine to foreclosure law.